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As filed with the Securities and Exchange Commission on May 7, 1999
Registration No. 333-70943
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Pre-Effective Amendment No.1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
_________________________________
WATSON PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
NEVADA 95-3872914
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
311 BONNIE CIRCLE
CORONA, CALIFORNIA 91720
(909) 270-1400
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
_______________________________
ROBERT C. FUNSTEN
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
WATSON PHARMACEUTICALS, INC.
311 BONNIE CIRCLE
CORONA, CALIFORNIA 91720
(909) 270-1400
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
MICHEL J. FELDMAN, ESQ.
STEVE CURTIS, ESQ.
D'ANCONA & PFLAUM LLC
111 E. WACKER DR., STE. 2800
CHICAGO, IL 60601-4205
(312) 602-2000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this
Registration Statement on Form S-3
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
___________________
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file an amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until this registration statement shall
become effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
INTRODUCTORY STATEMENT NOT FORMING PART OF PROSPECTUS
This registration statement on Form S-3 relates to the shares of the
registrant's common stock issuable upon exercise of the TheraTech stock options
described herein. The registrant has already filed a registration statement on
Form S-8 relating to shares of its common stock issuable upon exercise of the
stock options held by officers, consultants, and employees of TheraTech which
are eligible to be registered on Form S-8.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
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PRELIMINARY PROSPECTUS DATED MAY 7, 1999
SUBJECT TO COMPLETION
PROSPECTUS
55,587 SHARES
WATSON PHARMACEUTICALS, INC.
COMMON STOCK ($0.0033 PAR VALUE)
This prospectus relates to up to 55,587 shares of Watson common stock that
may be issued upon exercise of stock options issued under the TheraTech, Inc.
1992 Amended and Restated Directors' Stock Option Plan. On January 15, 1999, a
subsidiary of Watson Pharmaceuticals, Inc., a Nevada corporation, merged with
TheraTech, Inc., a Delaware corporation, pursuant to an Agreement and Plan of
Merger dated as of October 23, 1998. At the time of the merger each share of
TheraTech common stock outstanding was converted into the right to receive
approximately 0.2663 of a share of Watson common stock, including certain stock
options previously exercisable for TheraTech common stock that are now
exercisable for Watson common stock.
See "DESCRIPTION OF STOCK OPTIONS" below on page 12 for a description of
the stock options. See "RISK FACTORS" below on page 6 for a description of
risks associated with investing in stock options to acquire Watson common stock.
Watson common stock is traded on the New York Stock Exchange under the
symbol "WPI." On May 5, 1999, the last reported sale price of the company's
common stock on the New York Stock Exchange was $40.38 per share.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES HAS
APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED UNDER THIS PROSPECTUS OR
PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this prospectus is , 1999
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INFORMATION REGARDING WATSON
Watson is a fully integrated pharmaceutical company engaged in the research
and development, production, marketing and distribution of off-patent and
branded pharmaceutical products.
Watson has made significant recent acquisitions of businesses, products and
technologies. During 1997, Watson acquired Royce Laboratories, Inc., a
developer and manufacturer of off-patent pharmaceutical products, and Oclassen
Pharmaceuticals, Inc., a developer and marketer of dermatology products. Watson
acquired The Rugby Group, Inc., a developer and marketer of off-patent
pharmaceutical products, in February 1998. Watson also made several product
acquisitions during 1997 and 1998, including the acquisition of certain oral
contraceptive products from G.D. Searle & Co. and the acquisition of an anti-
hypertensive product from Rhone-Poulenc Rorer. In January 1999, Watson acquired
TheraTech, Inc., a leading drug-delivery company. Watson continues regularly to
review potential opportunities to acquire or invest in other technologies,
products or product rights and businesses compatible with its existing business.
Watson's principal executive offices are located at 311 Bonnie Circle,
Corona, California 91720. Its telephone number is (909) 270-1400.
RISK FACTORS
In addition to other information in this prospectus on Form S-3, you should
carefully consider the following risk factors in evaluating Watson's business.
Risks Associated with Investing in Watson common stock
An investment in stock options to acquire shares of Watson common stock may not
provide you with the same return as your investment in options to acquire shares
of TheraTech common stock.
As a result of the merger between Watson and TheraTech, the nature of your
investment has changed. TheraTech is no longer an independent company; it is a
wholly owned subsidiary of Watson. TheraTech option holders are now Watson
option holders. Your continuing financial interest in the business of
TheraTech, a drug-delivery technology company, has ceased and you now have a
financial interest in the business of Watson, a larger and fully integrated
pharmaceutical company. The value of your stock options will increase if the
value of Watson common stock increases above your exercise price (as adjusted to
reflect the merger of Watson and TheraTech) and the value of your stock options
will decline if the value of Watson common stock decreases. The value of
TheraTech's business may or may not have an effect on the value of Watson common
stock. If you exercise your stock options to acquire shares of Watson common
stock, you will be entitled to vote on all matters submitted to a vote of the
Watson stockholders; however, you will not acquire a right to vote on matters
specifically affecting TheraTech.
The effect of future transactions on Watson's business or stock price is
uncertain.
Watson regularly reviews potential transactions related to technologies,
products or product rights and businesses complementary to its business. Such
transactions could include mergers, acquisitions, strategic alliances, licensing
agreements or co-promotion agreements. In the future, Watson may choose to enter
into such transactions at any time. The impact of transactions on the market
price of a company's stock is often uncertain, but may cause substantial
fluctuations to the market price. Consequently, you should be aware that the
announcement of any such transaction could have a material adverse effect upon
the market price of Watson's common stock. Moreover, depending upon the nature
of any transaction, Watson may experience a charge to earnings, which could be
material, and could possibly have an adverse impact upon the market price of
Watson common stock. In connection with the TheraTech merger, Watson expects to
record merger-related expenses of approximately $20 million in the first quarter
of 1999. In addition, this transaction or any other future transaction could be
disruptive to the management of Watson, and any such disruption could also have
a material adverse effect on its business or financial condition.
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Watson's stock price has experienced substantial volatility. Watson has not
paid and does not intend to pay dividends.
The market price of Watson common stock has been and may continue to be
volatile. For example, the market price of Watson common stock has fluctuated
during the past twelve months between $30.50 per share and $63.00 per share and
may continue to fluctuate. Generally market price fluctuations in a company's
stock may be due to acquisition or other material public announcements, along
with a variety of additional factors including, without limitation:
(a) new product introductions,
(b) the purchasing practices of the company's customers,
(c) changes in the degree of competition for a company's products,
(d) the announcement of technological innovations or new commercial
products by a company or its competitors,
(e) governmental regulation,
(f) regulatory approvals or regulatory issues,
(g) developments relating to patents or proprietary rights,
(h) publicity regarding actual or potential clinical results with respect
to products under development by a company or others and
(i) political developments or proposed legislation in the pharmaceutical
or healthcare industry.
Any of these factors, among others, could have a significant impact on the
market price of Watson's common stock.
The company has not paid any cash dividends since inception, although
certain of its wholly-owned subsidiaries may have paid dividends prior to a
combination with Watson. Watson does not anticipate paying cash dividends in the
foreseeable future.
Holders of the company's issued common stock could experience dilution as a
result of future transactions.
In April 1998, Watson filed a registration statement with the SEC which
allows Watson to raise up to $300 million from offerings of senior or
subordinated debt securities, common stock, preferred stock or a combination
thereof, at such times and in such amounts as Watson deems appropriate. To date,
Watson has issued $150 million in senior unsecured notes pursuant to such
registration statement. In addition,
(a) Watson may engage in future transactions, including the acquisition of
technologies, products, product rights and businesses, which could
involve the issuance of its securities and
(b) Watson has commitments pursuant to existing stock option plans and
free-standing stock options and warrants which are likely to result in
the issuance of additional shares of Watson common stock.
The issuance of any securities for these or other reasons could result in
dilution of existing shareholders' equity interest in Watson. In addition, the
Watson Board of Directors has the authority to issue, without vote or action of
shareholders, shares of preferred stock, in one or more series, and to fix the
rights, preferences, privileges and restrictions thereof. Any such series of
preferred stock could contain dividend rights, conversion rights, voting rights,
terms of redemption, redemption prices, liquidation preferences or other rights
superior to the rights of holders of Watson common stock. The Watson Board of
Directors has no present intention of issuing any such preferred series, but
reserves the right to do so in the future.
Risks Associated with Investing in the Business of Watson
Watson is dependent on product development and commercialization for continued
growth and development.
Watson's future results of operations will depend to a significant extent
upon its ability to successfully commercialize new proprietary and off-patent
pharmaceutical products in a timely manner. As a result, new products must be
continually developed, tested and manufactured and, in addition, must meet
regulatory standards and receive requisite regulatory approvals. Products
currently in development by the company may or may not receive the regulatory
approvals necessary for marketing by Watson or other third-party partners.
Furthermore, the development and commercialization process is time-consuming and
costly. If any of Watson's products, if and when
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developed and approved, cannot be successfully commercialized, Watson's
operating results could be adversely affected. This risk particularly exists
with respect to the development of proprietary products because of the
uncertainties and higher costs associated with research and development of such
products and the unproven market acceptability of such products. Delays or
unanticipated costs in any part of the process or the inability of Watson to
obtain regulatory approval for its products, including failure to maintain its
manufacturing facilities in compliance with all applicable regulatory
requirements, could adversely affect Watson's operating results.
Watson is dependent on key personnel for its continued growth and development.
The success of Watson's present and future operations will depend, to a
great extent, upon the experience, abilities and continued services of certain
executive officers of Watson, including Allen Y. Chao, Ph.D. The loss of the
services of any of these officers could have a material adverse effect on the
company. Watson has entered into employment agreements with certain of its
executive officers, including Dr. Chao. Watson does not carry key-man life
insurance on any of its officers. Watson's success also will depend upon its
ability to attract and retain other highly qualified scientific, managerial,
sales and manufacturing personnel. However, there is a risk of departure of
employees due to certain factors, including factors relating to the integration
process following mergers. Competition for such personnel is intense. In this
respect, Watson competes with numerous pharmaceutical and healthcare companies,
as well as universities and nonprofit research organizations. If Watson cannot
continue to attract and retain qualified personnel, the company's results of
operations and strategic plan may be negatively impacted.
Watson may not be able to obtain patent coverage or otherwise protect
proprietary technology.
Watson's success with its proprietary products will depend in part on its
ability to obtain patent protection for its products. Watson has a number of
U.S. and foreign patents issued and pending. However, if Watson's patent
applications are not approved, or, if approved, if such patents are not upheld
in a court of law, it may prohibit Watson from commercially exploiting products
it develops. Also, such patents may or may not provide competitive advantages
for their respective products or they may be challenged or circumvented by
competitors, in which case the company's ability to commercially exploit these
products may be diminished.
Watson also relies on trade secrets and proprietary know-how which it seeks
to protect, in part, through confidentiality agreements with its partners,
customers, employees and consultants. It is possible that these agreements will
be breached or that they won't be enforceable in every instance, and that Watson
will not have adequate remedies for any such breach. It is also possible that
Watson's trade secrets will become known or independently developed by
competitors.
Watson may be required or may desire to obtain licenses to patents and
other proprietary rights held by third parties to develop, manufacture and
market products. If Watson is unable to obtain these licenses on commercially
reasonable terms, or if any licensed patents or proprietary rights are deemed
invalid or unenforceable, Watson's ability to commercially exploit such products
may be inhibited. In addition, intellectual property law is subject to change
by the courts and other governmental bodies. For example, a 1997 Supreme Court
ruling could impact a party's ability to enforce its patents and to defend
against potential patent infringement claims by third parties. Watson's ability
to commercialize its products will depend on it not infringing the valid patent
rights of others. Litigation concerning patents and proprietary technologies
can be protracted and expensive and brand companies are increasingly suing
competitors as a way of delaying the introduction of competitors' products. Any
such litigation may be costly and time consuming, and could result in a
substantial delay in a new product introduction, any of which could have a
material adverse effect on Watson's business, financial condition or results of
operations.
Watson may experience difficulty integrating the business of TheraTech into its
operations.
The merger of Watson and TheraTech involves the integration of two
companies that have previously operated independently. Watson and TheraTech may
encounter difficulties in integrating their businesses, which could have a
material adverse effect on the operating results or financial condition of the
combined company's business. Watson or TheraTech may experience disruption in
its business or employee base as a result of uncertainty following the merger
and during the integration process. There is also a risk that key employees of
TheraTech may seek employment elsewhere, including with competitors.
Furthermore, the operations, management and personnel of the two companies may
not be compatible, and Watson or TheraTech may also experience the loss of key
personnel for that reason. If the companies are not able to successfully blend
their products and technology to create the advantages which the TheraTech
merger is intended to create, it may affect the company's results of operations,
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its ability to develop and introduce new products and the market price of your
shares. Further, there may be overlap between the products or customers of
Watson and TheraTech which may create conflicts in relationships or other
commitments detrimental to the integrated businesses.
Increased competition may cause reduced revenues and gross margins.
Due to the introduction of products from time to time that may compete with
Watson's products, Watson may continue to experience increased price
competition. Consequently, Watson may experience a reduction in future sales or
gross margin of such products which, absent additional offsetting revenues,
could have a material adverse effect on the financial condition and results of
operations of Watson.
Watson is dependent on certain suppliers that in some cases may be the only
source of finished products or raw materials.
Some materials used in Watson's manufactured products, and some products
sold by Watson, are currently available only from sole or limited suppliers.
This includes products that have historically accounted for a significant
portion of Watson's revenues. In addition, sources for materials for Watson's
products must be approved by the U.S. Food and Drug Administration, the U.S.
Drug Enforcement Administration and/or other governmental agencies or bodies.
For some products sold by Watson, only one or very few suppliers have been
approved for certain component materials or products. Any interruption or delay
in supply of materials or products from sole or limited source suppliers, or
delays in the applicable governmental approval of new suppliers, or delay in
approving Watson as the manufacturer of such products, could have a material
adverse effect on Watson's business.
The Year 2000 issue may affect Watson's operations.
Watson has assessed and continues to assess the potential impact of the
situation commonly referred to as the "Year 2000 Issue." The Year 2000 Issue
concerns the inability of information systems and computer software programs to
properly recognize and process date sensitive information relating to the Year
2000 and beyond. Watson has several information system improvement initiatives
underway which management believes will adequately address the Year 2000 Issue.
However, if third party payors, suppliers, distributors, transporters or joint
venture partners do not adequately address their Year 2000 Issues or if Watson
fails to successfully complete its Year 2000 initiative, it could be adversely
affected in the future.
Watson may not receive anticipated income from its existing or future joint
ventures.
A portion of Watson's net income is derived from joint ventures. In
addition, a substantial portion of Watson's efforts in developing controlled-
release technology prior to the TheraTech merger was primarily conducted through
joint ventures. These arrangements involve various partners. Watson does not
control the joint ventures or the commercial exploitation of the licensed
products. Although restrictions contained in certain of Watson's joint venture
arrangements have not in the past had a material adverse impact on Watson's
marketing of its products, any such marketing restriction could affect future
revenues and have a material adverse effect on its operations. Watson's earnings
may be negatively impacted if existing collaborative or joint venture partners
withdraw or if these products are not timely developed, approved or successfully
commercialized.
Product liability claims are a risk and insurance is expensive.
The design, development and manufacture of Watson's products involve an
inherent risk of product liability claims and associated adverse publicity.
Insurance coverage is expensive and may be difficult to obtain, and may not be
available in the future on acceptable terms, or at all. Although Watson
currently maintains product liability insurance for its products in the amounts
Watson believes to be commercially reasonable, if the coverage limits of
Watson's insurance policies are not adequate, a claim brought against Watson,
whether fully covered by insurance or not, could have a material adverse effect
upon Watson.
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Risks Associated with Investing in the Pharmaceutical Industry
The pharmaceutical industry is extensively regulated by various government
agencies.
All pharmaceutical manufacturers are subject to extensive, complex, costly
and evolving governmental regulations and restrictions administered by the Food
and Drug Administration ("the FDA"), other federal and state agencies, and
numerous governmental authorities in other countries. Moreover, Watson and
certain of its vendors are subject to the periodic inspection of their
facilities and operations and/or the testing of their products by the Food and
Drug Administration, the U.S. Drug Enforcement Agency, the U.S. Environmental
Protection Agency and similar state, local and foreign regulatory authorities.
Each of these organizations conducts periodic inspections to confirm continued
compliance with its regulations. In connection with such an inspection by the
FDA of the company's Corona, California facility, the FDA issued to the company
a Warning Letter in January 1999. The Warning Letter related to the company's
current Good Manufacturing Practices compliance in areas such as documentation,
training and laboratory controls. The company has responded to the Food and
Drug Administration and has adopted certain improvements to its procedures.
Watson intends to implement certain additional corrective improvements and
anticipates that these activities will be substantially completed within the
next few months. The company does not expect that expenditures for these
improvements will be material. Production at Watson's Corona facility has not
been interrupted and the company expects that production will continue while it
implements the improvements. In connection with a January 1999 inspection of
the company's Miami, Florida facility, the FDA issued to Watson a Warning Letter
in April 1999. In the Warning Letter, the agency commented that observations
about inadequate investigations, documentation and training had appeared in past
inspection reports (although the FDA acknowledged that a number of these had
occurred prior to Watson purchase of the Miami facility). Watson believes that
certain ongoing improvements it has implemented and intends to implement at its
Miami facility will address the FDA's concern and has responded to the FDA
accordingly. Moreover, in the April 1999 Warning Letter, the FDA acknowledged
that it had received the company's previously submitted responses to the FDA's
observations made in its January 1999 inspection. The FDA's January 1999
observations generally concerned the company's current Good Manufacturing
Practices compliance in areas such as documentation, investigations and
training. The FDA stated that it would evaluate the corrections taken by the
company at the FDA's next inspection.
Failure to comply with governmental regulations can result in fines,
unanticipated compliance expenditures, interruption of production and criminal
prosecution. Although Watson has instituted internal compliance programs, if
such programs do not meet regulatory agency standards or if compliance is
deficient in any way, it may have a material adverse effect on the company.
The process for obtaining governmental approval to manufacture and market
pharmaceutical products is rigorous, time-consuming and costly, and Watson
cannot predict the extent to which it may be affected by legislative and
regulatory developments. Watson is dependent on receiving FDA and other
governmental approvals prior to manufacturing, marketing and shipping its
products. Consequently, there is always the chance that the FDA or other
applicable agency will not approve products, or that the rate, timing and cost
of such approvals will adversely affect Watson's product introduction plans or
results of operations. The Uruguay Round Agreements Act ("URAA"), which became
effective June 8, 1994, lengthens the term of existing and future patents by
changing the patent term to the longer of 17 years from the date of patent grant
or 20 years from the date of patent application. These URAA changes could
postpone approval eligibility of some products.
The pharmaceutical industry is highly competitive which affects the company's
product selection, pricing, gross margins and market share.
The pharmaceutical industry is intensely competitive. Watson's competitors
vary depending upon product categories, and within each product category, upon
dosage strengths and drug-delivery systems. Such competitors include the major
brand name and off-patent manufacturers of pharmaceuticals, especially those
doing business in the United States. Many competitors have been in business for
a longer period of time than Watson, have a greater number of products on the
market and have greater financial and other resources. Newly introduced off-
patent products with limited or no off-patent competition are typically sold at
higher selling prices, often resulting in increased gross profit margins. As
competition from other manufacturers intensifies, selling prices typically
decline. Consequently, the maintenance of profitable operations will depend, in
part, on Watson's ability to maintain efficient production capabilities and to
develop and introduce new products in a timely and cost-effective manner.
Developments by others could make Watson's products or technologies
noncompetitive or obsolete.
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THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT. YOU
SHOULD BE AWARE THAT ANY SUCH STATEMENTS ARE PROJECTIONS OR ESTIMATES AS TO
FUTURE EVENTS, WHICH MAY OR MAY NOT OCCUR. IN ADDITION TO THE OTHER INFORMATION
IN THIS PROSPECTUS, YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS.
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WHERE YOU CAN FIND MORE INFORMATION
Information regarding Watson, including historical financial statements and
detailed descriptions of the business of Watson is included in documents other
than this prospectus. Watson files annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy reports, statements or other information about Watson on
file at the Securities and Exchange Commission's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. Please call the
Securities and Exchange Commission at 1-800-SEC-0330 for further information on
the public reference rooms. You may also find Watson's Securities and Exchange
Commission filings through commercial document retrieval services and the web
site maintained by the Securities and Exchange Commission at http://www.sec.gov.
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You may find additional information about Watson via its website:
http://www.watsonpharm.com. Information in the company's web site is intended
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to be timely and accurate; however, there can be no assurance that this is the
case. Such information is expressly excluded from this prospectus.
The company has filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, a registration statement on Form S-3
(herein, together with all amendments and exhibits thereto, referred to as the
"registration statement") with respect to the shares of the company's common
stock to be issued pursuant to this prospectus. This document is a part of that
registration statement. This prospectus does not contain all of the information
set forth in the registration statement, certain parts of which are omitted in
accordance with the rules and regulations of the Securities and Exchange
Commission. Statements contained herein or in any document incorporated by
reference herein as to the contents of any contract or other document referred
to herein or therein are not necessarily complete, and in each circumstance
reference is made to the copy of such contract or other document filed as an
exhibit to the registration statement, or incorporated by reference. Each such
statement is qualified in all respects by such reference. The registration
statement and any amendments thereto, including exhibits filed as a part
thereof, are available for inspection and copying as set forth above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This prospectus may refer you to information about Watson located in other
documents. The information in those documents, which are identified below, is
specifically deemed to be part of this prospectus and to have been delivered to
you in connection with making your decision to vote on the merger. You can
obtain a free copy of these and other documents on the Securities and Exchange
Commission's Web site or, free of charge, by writing, calling or faxing:
Attention: Ms. Sara Swee
Director Of Corporate Communications.
Watson Pharmaceuticals, Inc.
311 Bonnie Circle
Corona, California 91720
Tel: (909) 270-1400
Fax: (909) 270-1429
The following documents filed with the Securities and Exchange Commission
are incorporated by reference herein:
1. Annual Report of the company on Form 10-K for the year ended December
31, 1998.
2. Current Report of the company on Form 8-K dated January 15, 1999.
3. The description of the company's common stock contained in its
Registration Statement on Form
8-A dated April 3, 1992.
You should also consider as a part of this document all documents that
Watson files under the Securities Exchange Act of 1934, as amended, after the
date of this prospectus but prior to the termination of the offering made by
this prospectus. If any document Watson files under the Securities Exchange Act
of 1934 changes in any way a statement made in any earlier document, including
this document, you should consider the most recently reported information to be
the correct information, rendering the earlier statements invalid to the extent
they are modified.
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You should only rely on the information contained in this document or that
we have referred you to. We have not authorized anyone to provide you with
different information. You should only consider this prospectus an offer to
purchase the securities discussed in this prospectus if it is lawful in the
jurisdiction in which you reside. Although we believe we have provided you with
all of the information which would be helpful to you in your decision to acquire
shares of common stock, it is possible that after we have delivered this
prospectus to you events may occur at Watson which might affect your decision
and or the value of common stock.
USE OF PROCEEDS
The net proceeds received by the company upon any exercise of the stock
options described below under "DESCRIPTION OF STOCK OPTIONS" will be added to
the company's capital and will be used for general corporate purposes. During
periods that the exercise prices of such options are higher than the market
price of the company's common stock, the company does not expect that such
options will be exercised.
DESCRIPTION OF STOCK OPTIONS
In connection with the merger, each of the TheraTech stock options has
become an option to purchase a number of whole shares of Watson common stock
equal to the number of shares of TheraTech common stock into which such stock
options were exercisable immediately prior to the merger multiplied by the
exchange ratio of 0.2663 at a stock option exercise price determined by dividing
the exercise price of such stock option immediately prior to the merger by the
exchange ratio of 0.2663 (being rounded to the nearest full cent with $0.005
rounded upward).
GENERAL DESCRIPTION
Under the 1992 TheraTech Directors' Stock Option Plan, non-employee
directors of TheraTech, directors who were not officers or employees of
TheraTech, were eligible to receive stock option grants. The Directors' Stock
Option Plan provided for:
(a) an initial grant of a stock option to acquire 7,500 shares of
TheraTech common stock (which equates to approximately 1,997 shares of
Watson common stock after applying the exchange ratio of 0.2663) providing
that one-third of the shares subject to each initial grant of a stock
option becoming exercisable on the first, second and third anniversary of
its grant date, respectively, and
(b) each non-employee director received a stock option to purchase
4,000 shares of TheraTech common stock during each year thereafter that the
non-employee director continued to serve as director (which equates to
approximately 1,065 shares of Watson common stock after applying the
exchange ratio of 0.2663).
A total of 208,750 options to acquire TheraTech common stock was issued and
outstanding under the Directors' Stock Option Plan at the time of the merger,
which equates to approximately 55,587 shares of Watson common stock, after
applying the exchange ratio of 0.2663.
The exercise price per share of all stock options granted under the
Directors' Stock Option Plan was equal to the per share fair market value of
TheraTech common stock on the date of grant. Payment of the purchase price upon
exercise of any stock option granted under the Directors' Stock Option Plan may
be made in cash, by Watson common stock held by the optionee or by promissory
note.
12
<PAGE>
LEGAL MATTERS
The validity of the issuance of the company's common stock being offered
hereby will be passed upon for the company by D'Ancona & Pflaum LLC, Chicago,
Illinois. As of the date of this registration statement, Michel J. Feldman, a
member of D'Ancona & Pflaum LLC and a director of the company, beneficially owns
46,000 shares of the company's common stock, 1,000 of which he disclaims
beneficial ownership. In addition, other members of D'Ancona & Pflaum LLC own
additional shares of the company's common stock, which ownership is not material
in the aggregate.
EXPERTS
The consolidated financial statements of Watson Pharmaceuticals, Inc. as of
December 31, 1998 and 1997 and for each of the three years in the period ended
December 31, 1998 incorporated in this prospectus by reference to the Annual
Report on Form 10-K of Watson Pharmaceuticals, Inc. for the year ended December
31, 1998 have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The financial statements of Oclassen Pharmaceuticals, Inc. for the years
ended December 31, 1996 incorporated by reference in this prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports.
The consolidated financial statements of Somerset Pharmaceuticals, Inc. and
subsidiaries as of December 31, 1997 and 1996, and for each of the three years
in the period ended December 31, 1997, incorporated in this prospectus by
reference from the Annual Report on Form 10-K of Watson Pharmaceuticals, Inc.
for the year ended December 31, 1998 have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which is incorporated herein by
reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The only expenses incurred in connection with this transaction are the
following, all of which are estimated.
<TABLE>
<CAPTION>
<S> <C>
Accounting fees and expenses.............................. $ 8,000
Legal fees and expenses................................... $ 8,000
Total..................................................... $16,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 78.751 of the Nevada Revised Statutes authorizes a corporation,
under certain circumstances, to indemnify its directors and officers (including
reimbursement for expenses incurred). The registrant has provided for
indemnification to the fullest extent permitted by the provisions of the Nevada
statute in its Articles of Incorporation and Bylaws.
The registrant maintains a directors' and officers' liability insurance
policy that, subject to the terms and conditions of the policy, provides
coverage up to $30,000,000 in the aggregate (subject to a $250,000 retention per
loss) arising from any wrongful act (as defined by the policy) in his or her
capacity as a director or officer. The policy reimburses the registrant for
amounts which lawfully indemnifies the registrant or as required or permitted by
law to indemnify its directors and officers.
13
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
2.1 Agreement and Plan of Merger, among Watson Pharmaceuticals, Inc.,
TheraTech, Inc. and The Jazz Merger Corp. dated as of October 23,
1998, incorporated by reference to Appendix A of the Proxy
Statement/Prospectus included in the Registration Statement on S-4,
Reg. No. 333-68007 and hereby incorporated by reference.
3.1 Articles of Incorporation of Watson and all amendments thereto,
filed as Exhibit 3.1 to Watson's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1995 and Exhibit 3.1 (A) to Watson's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996
and hereby incorporated by reference.
3.2 Bylaws of Watson, as amended as of December 11, 1998, filed as
Exhibit 3.2 to Watson's Registration Statement on Form S-8 filed on
January 21, 1999 and hereby incorporated by reference.
4.1 TheraTech, Inc. 1992 Amended and Restated Directors' Stock Option
Plan, incorporated by reference to TheraTech's Proxy Statement filed
in connection with its 1994 Annual Meeting of Stockholders, and
hereby incorporated by reference.
*5.1 Opinion of D'Ancona & Pflaum LLC as to the legality of the common
stock being offered.
*5.2 Opinion of Kummer, Kaempfer, Bonner & Renshaw as to the legality of
the common stock being offered.
*23.1 Consent of D'Ancona & Pflaum LLC (included in exhibits 5.1).
*23.2 Consent of Kummer, Kaempfer, Bonner & Renshaw (included in exhibit
5.2).
23.3 Consent of PricewaterhouseCoopers LLP.
23.4 Consent of Deloitte & Touche LLP.
23.5 Consent of Arthur Andersen LLP.
*24.1 Power of Attorney.
________________________
*Previously filed.
(b) Financial Statement Schedules
None.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which,
14
<PAGE>
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Securities and Exchange Commission by the registrant pursuant to section 13 or
section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of 1934
that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions (see Item 15 above), or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it was
declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Corona, State of California, on the 6th day of May,
1999.
<TABLE>
<CAPTION>
WATSON PHARMACEUTICALS, INC.
(registrant)
<S> <C>
By: /s/ ALLEN Y. CHAO
------------------------
Allen Y. Chao, Ph.D.
Chairman, Chief Executive Officer and
President (Principal Executive Officer)
By: /s/ MICHAEL E. BOXER
------------------------
Michael E. Boxer
Chief Financial Officer
(Principal Financial Officer)
By: /s/ R. CHATO ABAD
------------------------
R. Chato Abad
Vice President-Finance
(Principal Accounting Officer)
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signatures Titles Date
---------- ------ ----
<S> <C> <C>
/s/ Allen Y. Chao, Ph.D Chairman, Chief Executive Officer and May 6, 1999
- ---------------------------------------------- President (Principal Executive Officer)
Allen Y. Chao, Ph.D.
* Director May 6, 1999
- ----------------------------------------------
Michel J. Feldman
* Director May 6, 1999
- ----------------------------------------------
Michael J. Fedida
* Director May 6, 1999
- ----------------------------------------------
Alec D. Keith, Ph.D.
* Director May 6, 1999
- ----------------------------------------------
Albert F. Hummel
* Director May 6, 1999
- ----------------------------------------------
Ronald R. Taylor
* Director May 6, 1999
- ----------------------------------------------
Andrew L. Turner
*By: /s/ ALLEN Y. CHAO Attorney-in-fact May 6, 1999
- ----------------------------------------------
Allen Y. Chao, Ph.D.
</TABLE>
16
<PAGE>
WATSON PHARMACEUTICALS, INC.
EXHIBIT INDEX
PRE-EFFECTIVE AMENDMENT NO. 1 TO FORM S-3
2.1 Agreement and Plan of Merger, among Watson Pharmaceuticals, Inc.,
TheraTech, Inc. and The Jazz Merger Corp. dated as of October 23,
1998, incorporated by reference to Appendix A of the Proxy
Statement/Prospectus included in the Registration Statement on S-4,
Reg. No. 333-68007 and hereby incorporated by reference.
3.1 Articles of Incorporation of Watson and all amendments thereto,
filed as Exhibit 3.1 to Watson's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1995 and Exhibit 3.1 (A) to Watson's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996
and hereby incorporated by reference.
3.2 Bylaws of Watson, as amended as of December 11, 1998, filed as
Exhibit 3.2 to Watson's Registration Statement on Form S-8 filed on
January 21, 1999 and hereby incorporated by reference.
4.1 TheraTech, Inc. 1992 Amended and Restated Directors' Stock Option
Plan, incorporated by reference to TheraTech's Proxy Statement filed
in connection with its 1994 Annual Meeting of Stockholders and
hereby incorporated by reference.
*5.1 Opinion of D'Ancona & Pflaum LLC as to the legality of the common
stock being offered.
*5.2 Opinion of Kummer, Kaempfer, Bonner & and Renshaw as to the
legality of the common stock being offered.
*23.1 Consent of D'Ancona & Pflaum LLC (included in exhibit 5.1).
*23.2 Consent of Kummer, Kaempfer, Bonner & Renshaw (included in exhibit
5.2).
23.3 Consent of PricewaterhouseCoopers LLP.
23.4 Consent of Deloitte & Touche LLP.
23.5 Consent of Arthur Andersen LLP.
*24.1 Power of Attorney.
________________________
* Previously filed.
17
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Amendment No. 1 to
the Registration Statement on Form S-3 of our report dated February 17, 1999
relating to the financial statements, which appears in Watson Pharmaceuticals,
Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998. We also
consent to the reference to us under the heading "Experts" in such Registration
Statement.
/s/ PRICEWATERHOUSECOOPERS LLP
- -------------------------------
Los Angeles, California
May 4, 1999
<PAGE>
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Watson Pharmaceuticals, Inc. on Form S-3 of our report dated February 4, 1998
relating to the consolidated financial statements of Somerset Pharmaceuticals,
Inc. and subsidiaries as of December 31, 1997 and 1996 and for each of the three
years in the period ended December 31, 1997, incorporated by reference in the
Annual Report on Form 10-K of Watson Pharmaceuticals, Inc. for the year ended
December 31, 1998 and to the reference to us under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
- --------------------------
Pittsburgh, Pennsylvania
May 4, 1999
<PAGE>
EXHIBIT 23.5
CONSENT OF ARTHUR ANDERSEN LLP
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement No. 333-70943 of our report dated
January 17, 1997 and to all references to our Firm included in this Registration
Statement on Pre-Effective Amendment No. 1 to Form S-3. It should be noted that
we have not audited any financial statements of Oclassen Pharmaceuticals, Inc.
subsequent to December 31, 1996 or performed any audit procedures subsequent to
the date of our report.
/s/ ARTHUR ANDERSEN LLP
- ------------------------
May 6, 1999
